Oil prices have been rising over the past couple of months, boosted by rising demand and limited supply. Last week, WTI price rose above $89.0 per barrel, registering a new 7-year high and many analysts predict it will reach three-digit figures within the year. Demand for oil is on the rise in the cold winter months and the rise of Omicron cases throughout the globe has not limited transportation as much as originally anticipated.
Rising geopolitical tensions have also been driving the price of oil up. The EU and the UK are drafting plans to enforce sanctions on new Russian gas projects in the event of a Russian attack against Ukraine. Such a move would limit Europe’s natural gas supplies severely and if the distribution of oil and natural gas is disrupted, Europe may face an energy crisis.
Oil supply worldwide is also limited and cannot be turned up to pre-pandemic levels so swiftly, and existing inventories are tight. Even though OPEC has agreed to increase its output by 400,000 barrels per day, it is struggling to meet this goal, as some of its member countries, such as Nigeria and Iraq, cannot meet production targets. The monthly OPEC-JMMC meeting will take place on February 2nd, where the organizations will discuss their future policy and are expected to announce oil production levels. High volatility for the price of oil is expected during the meeting and the ensuing announcements.
WTI traded sideways on Monday, testing its $87.19 per barrel resistance. In case the trend is reversed, support may be found at the $78.8 per barrel level and further down around $77.8 per barrel.
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